Municipal Bonds as a Tool for Financing Capital Investment in Local Government Units, Palestine
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Date
2018-12-10
Authors
Awad, Yaqin Abdullah Omar
Journal Title
Journal ISSN
Volume Title
Publisher
جامعة النجاح الوطنية
Abstract
Municipalities are the public institutions that are responsible for providing services to citizens. Capital development projects are on the top priorities of municipalities. Such a priority is very demanding and critical due to the investment required, this is in addition to the scarcity of revenue sources in conjunction with the increased population. In Palestine, the trend of revenue per capita is decreasing in 73% of the sample municipalities. Thus, employing new ways of financing can be the solution. The percentage of employing debts at the Palestinian local authorities is very few. Accordingly, there is a room for using debts in certain circumstances as a new financial instrument with a debt limit according to the legislations and regulations. Municipal bonds have been used worldwide to finance capital investments at the local government units. This research concentrates on the determinants of municipal bond issuance, types of bonds, bond sale methods, debt maturity, par value, and risk-return relationship.
The purpose of this research is to develop and to find methods for assessing creditworthiness that are suitable and applicable to local government units in Palestine. The sample was composed of 11 municipalities in the West Bank.
Various variables such as macroeconomic and municipal status variables are identified to measure the effect of issuing municipal bonds on financing capital investment projects for the local government units in Palestine.
The study of the Palestinian economy has taken into consideration the following factors: historical interest rates, international financial position, external debt and general budget structure. Moreover, macroeconomic variables have been measured by revenues and expenditures per capita, cost of labour and unemployment rate. Municipal status variables have the following subgroup variables: municipality size, financial reporting quality, outstanding debt, and financial distress. Various financial ratios are used. Furthermore, comparative and cross-sectional analysis has been conducted besides horizontal and vertical analysis; the analysis for these ratios has been carried out to determine the municipal status variables.
The research concludes that macroeconomic variables and municipality status affect the issuance of "municipal revenue bonds." Based on testing the methodology, three municipalities are recommended to issue revenue municipal bonds.
Description
Keywords
Municipal bonds, Issuance, Palestine, Municipalities, Revenues, Transfers, Grants, Debt, Budget, Deficit, Financial status, Creditworthiness, IPSAS, Disclosure, Strategic plans.